Crop Insurance

Overpayment of Claims by Private Companies Costs the Government Millions Gao ID: RCED-88-7 November 20, 1987

Pursuant to a congressional request, GAO examined the Federal Crop Insurance Corporation's (FCIC) oversight and control of the loss adjustment practices of private reinsured companies.

GAO found that reinsured companies: (1) did not adjust 95 percent of 134 sample claims in accordance with FCIC policies and procedures; (2) should not have paid about 31 percent of the $9.4 million in claims; (3) may have intentionally overpaid claimants; and (4) made incorrect determinations of production guarantees, actual production, payment amounts, and program eligibility. GAO also found that FCIC: (1) improperly adjusted 62 percent of 37 sample claims; and (2) overpaid about 1 percent of those claims. In addition, GAO found that FCIC: (1) did not properly manage the loss adjustment processes of reinsured companies; (2) had inadequate oversight and control over such companies; and (3) did not screen reinsured claims for obvious errors, but recently began to systematically review the operations of reinsured companies.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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